Question

1. Define what an "Intergovernmental Revenue" is. Provide at least 2 examples.

2. Assume a local government has determined they will increase taxes in order to raise revenue to support their capital improvements plan. Contrast and compare the merits of increasing property taxes versus sales taxes. Consider the various forces which effect public budgeting in your response.

Answer 1

Answer : Intergovernmental revenue means that money which recieved from one government to another and it also includes grants,combined taxes and contingent liabilities and different types of advances recieved from other government.

Features :

• Intergovernmental revenue are the sum of money which has been collected by one government and used by another government.
• It is largest source of fund by state government.
• Intergovernmental revenue includes that funds has been allocated by the federal government to state and local government.
• The main purpose of transfer of fund is to welfare of the society.

Example :

1. Paying grants by the federal government to the state and local government.
2. Federal government supports for the welfare of the society such as educational grant.
3. Shared taxes between federal government and state government

Answer : Property tax is the amount paid by the owner of the property to the local government where as sale tax means a tax on selling of an goods and services. It has been collected by the seller from the buyer and deposited with government.

Merits of increasing property tax :

• Property tax is more reliable source as it has come directly to the government. There is no middle man between owner of the property and the government.
• Property tax is increasing than it does not affect our consumpation.
• Property tax is open and visible as compare to sale tax. Here, the property is owned by particular person. If there is increasing property tax , it has been directly affect the property owner who have apperication of property so it does not affect there consumpation but sales tax has been paid in some amount and they directly affect the consumpation.
• It affects wealthy person where as increasing sale tax affect the consumpation of the person.

Forces which affect public Budgeting :

Public budgeting means that expenditure of the government has been set up.There are various factors which influence public budgeting are :

• Political involvement : It means that while preparing budget political parties makes a great influence on the budget because they set budget according to their personal interest and reputation which makes minimum expenses.
• Economic factors : Position of an economy has affect the budget in such a way that if economy is in recession than state government has less revenue collected and less amount spend on budget where as inflation also affect the budget allocation.
• Population of the country also affected public budget as resources are limited. It there is increasing population and preparing budget is complicated task.
• Legal enviornment factor which state that local budgeting operates where current revenue is exactly equal to current expenditure.